GCER Featured Research Profile Series

Impactful differences and differential impacts: Georgetown Economist Louise Laage shows how to recover average effects in panels with unobserved and unexplained sources of heterogeneity.

A researcher wants to assess the effect of maternal inputs on a child’s cognitive development. The effects might differ across families due to, for instance, variation in maternal skills.  However, these skills could be unobservable to the researcher. Moreover, measurable inputs like a mother’s time spent with the child may be correlated with unobserved factors that vary over time, for instance her stress from the workplace.

Heterogeneity in the impact of these kinds of inputs can be large. Yet, in such situations the typical linear regression toolbox, even when the data is a panel, will not generally yield consistent estimates of the average effect.

GCER Fellow and Economics Professor Louise Laage examines methods for addressing problems like this in her recent paper, “A Correlated Random Coefficient Panel Model with Time-Varying Endogeneity.”  Professor Louise Laage shows how the effects of variables on outcomes can be recovered when there may be substantial unobserved heterogeneity in the population.

Her analysis focusses on scenarios where the effects of a variable could vary across individuals, and the researcher has no prior information on where this heterogeneity comes from. More precisely, the researcher has no information, a priori, on the joint distribution of the regressor and this unobserved heterogeneity. Measuring the average impact is a complicated task. Moreover, the regressor itself could be correlated with unobserved variables that affect the outcomes.

In her paper, Professor Laage proposes a compelling solution to these problems. She lays out an easy-to-compute, multi-step method that exploits variations over time in the instruments and the regressors. Laage also shows that her method can be used in situations where both sample selection issues and variation in the impact of the regressors arise.

Previously Featured Research Profiles:

Spring/Summer 2020 Featured Research Profile:

Spring/Summer 2019 Featured Research Profile: GCER Fellow Alexandre Poirier’s and Matthew Masten’s study of treatment effects carves out the circumstances under which circumstances carve out economic behavior. 

Fall 2018 Featured Research Profile: “You’re [not] fired!”–GCER Fellow Toshi Mukoyama and Sophie Osotimehin explore the dynamic linkages between employment protection regulations and firms’ innovation decisions.

Winter/Spring 2017-2018 Featured Research Profile: Child Care in Reverse: GCER Fellow Ami Ko explores the subtle effects of informal health care on the long-term care insurance market.

Fall/Winter 2016-2017 Featured Research Profile: Markets with Search and Matching Frictions: Georgetown economists James Albrecht and Susan Vroman discuss directed search in the housing market.

Fall/Winter 2015-2016 Featured Research Profile: How (not) to run a bank: Georgetown economist Martin Ravallion examines World Bank successes and failures.

Spring/Summer 2015 Featured Research Profile: Leaning in,… sort of: Georgetown economist Mary Ann Bronson explores reasons why men and women make different post-secondary educational investments.

Fall 2014 Featured Research Profile: Carbon emissions make the global economy tipsy… Harrison and Lagunoff study a “business-as-usual” scenario in a tipping model.

Spring 2014 Featured Research Profile: Collateral Damage to Standard Economic Theory… GCER Fellow Dan Cao shows how incorrect beliefs can fuel a crisis.

Fall 2013 Featured Research Profile: Oh what a tangled web we weave… Anderson and Smith explore the dilemmas of deception.

Winter/Spring 2013 Featured Research Profile: Unintended Consequences in the Struggle for Equal Rights: Anderson and Genicot explore the surprising relationship between suicides and female property rights in India.

Fall 2012 Featured Research Profile: Gale and O’Brien sing the blues over Use-or-Lose!

Spring/Summer 2012 Featured Research Profile:”What a piece of work is a man! How noble in Reason! How infinite in faculties!” … But how much is he worth? Huggett and Kaplan provide an answer.

Winter 2012 Featured Research Profile: Happiness is in the air! Levinson uses happiness surveys to put a dollar value on air quality.

Fall 2011 Featured Research Profile: Junior, the Risky Investment, Grandma, the Insurance Contract, and other bedtime stories as told by Gete and Porchia.

Spring/Summer 2011 Featured Research Profile: Ludema, Mayda, and Mishra show that when firms talk, governments listen.

Winter 2011 Featured Research Profile: Bachmann and Bai examine the effects of wealth bias in the policy process.